Amanda Pinkerton is a purchasing agent for an airconditioner manufacturer. Amanda is evaluating two potential suppliers of condensers for the AC production. "Best Condensers, LLC" quotes a price of $165 per condenser and guarantees highest quality and on time delivery. Another supplied, "Cheapest condensers, LLC" quotes a price of $135 per condenser and gives no other assurances.
You are the management accountant and Amanda needs your help to decide which supplier to buy from by having you prepare a comparison between the two supplies, as she knows her boss is likely to ignore factors without dollar estimates attached to them. Amanda gathers the following information to help you:
● Factory manufactures 2,000 air conditioners per year, being operated 250 days a year.
● Production time per day is 8 hours at a cost of $4,000 per hour to run the production line.
● Amanda estimates 20 hours of lost production time due to quality and delivery issues with supplier B
● Satisfied customers purchase, on average, three motorcycles during a lifetime.
● Satisfied customers recommend the product, on average, to 5 other people.
● Marketing estimates that using the seat from supplier B will result in 5 lost customers per year from repeat business and referrals.
● Average contribution margin per air conditioner is $5,000.
Estimate the costs of buying condensers from the cheaper supplier and briefly explain your reasoning. (Note: think creatively and make reasonable estimates; there is more than one correct answer.)
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Estimate the costs of buying condensers from the cheaper supplier and briefly explain your reasoning. (Note: think creatively and make reasonable estimates; there is more than one correct answer.)